The Zhitong Finance App learned that as the Middle East conflict continues to escalate, the price of gasoline at US gas stations has risen again to more than 4 US dollars per gallon, which has raised concerns in the market that inflationary pressure may increase further. According to the daily oil price data released by the American Automobile Association (AAA), the average price of unleaded gasoline in the US reached 4.003 US dollars per gallon. This is the first time that it has broken through this level after falling below the 4 US dollar mark for a month in a row.
Even though crude oil prices fell sharply in June, which drove gasoline prices down to $3.79 per gallon at least once, they have since rebounded again in early July and remained high. This is mainly due to a sharp decline in Russian refining capacity, low US imports, and tight gasoline stocks. Meanwhile, fuel demand remained relatively resilient during peak summer driving periods.
Today, as the US and Iran continue to attack each other, the risk that the Strait of Hormuz, a key channel for global energy transportation, will continue to be disrupted is rising. This contributed to the biggest increase in crude oil prices in a single week since April last week. Normally, the cost of crude oil accounts for more than half of the final price of gasoline.
According to reports, the US Central Command issued a statement on a social media platform saying that at 7 p.m. EST on July 19, the US military began an attack on Iran for the ninth night in a row to “continue to weaken Iran's military capability to attack merchant ships and civilian crew members passing through the Strait of Hormuz.” In response to US attacks, Iran has continued to attack various US military bases in the Middle East over the past few days.
Furthermore, according to news from Iran on the 19th, the traffic volume of the Strait of Hormuz has dropped to zero. As long as the US continues its provocative acts, the strait will remain closed. Currently, there are no ships passing through the Strait of Hormuz, and any attempt to cross the strait will be attacked by Iran.
Analysts pointed out that at present, this round of mutual attacks between the US and Iran, which has continued for many days, has gradually evolved into a long-term game over control of the Strait of Hormuz. Over the past few days, the US military's key strike locations all have a common characteristic. They are all close to the Strait of Hormuz and are responsible for the important functions of Iran's maritime traffic, energy exports, and military deployment. The US is trying to weaken Iran's military and logistical capabilities around the strait by continuously attacking these maritime nodes.
Iran's response was to expand the scope of the attack to the US military presence in the Gulf region. At the same time, Iran also strengthened its actual control over the passage through the Strait of Hormuz. Iran's Deputy Foreign Minister Garibabadi said a few days ago that in a state of war, Iran has complete control over the Strait of Hormuz. Iran will not allow this important waterway to be used for actions that endanger national security.
What is more noteworthy is that Iran is promoting further “legalization” of the management of the Strait of Hormuz, and a bill involving the long-term management of the Strait of Hormuz has already been submitted to the Iranian parliament. This means that some political forces in Iran want to pass legislation to elevate the management of the straits from military action and policy tools to a national legal framework.
For Iran, the Strait of Hormuz is no longer just a shipping issue; it has become the most important strategic bargaining chip in the current game against the US. Next, the battle between the US and Iran over the Strait of Hormuz may continue to be normalized, and there is no clear sign of either side making concessions in the short term.
In this context, shipping in the Strait of Hormuz came to a standstill again. Against the backdrop that the US recently set a new record for refined oil exports, but domestic gasoline inventories are 6% lower than the five-year average, the closure of the Strait of Hormuz waterway will directly reduce global supply, and the rise in international oil prices will in turn push up US gasoline prices.
Gasoline prices are one of the most intuitive indicators for Americans to perceive inflation. Although the overall price is still below the historical peak of more than $5 per gallon after the outbreak of the Russian-Ukrainian conflict in 2022, the rapid rise in gasoline prices in the US itself is enough to alert the market.
The rapid rise in gasoline prices has not only shaken Trump's core political commitment to curb inflation, but has also cast a shadow over Trump's economic agenda as the midterm elections approach. Analysts said that the continued rise in oil prices may adversely affect the Republican Party in the November midterm elections, when the two parties will compete for control of Congress. Voters have previously been unhappy with the high cost of living and Trump's way of governing the economy.
According to research by Ryan Cummings and Neil Mahoney of the Stanford Institute for Economic Policy Research, even if other economic effects were taken into account, the consumer confidence index in the University of Michigan survey would drop 4.5 points or more if gasoline prices rose by $1 per gallon. Cummings (working on gasoline policy from 2021 to 2023), an economist who worked on the Biden administration's Economic Advisory Committee, said that “roughly means that if the price of gasoline rises by $1 per gallon, people's feelings about the economy will worsen by 5%.”
As energy prices fell, the pressure on US prices eased somewhat compared to expectations in June, but now fuel costs have risen again, which may complicate the outlook for US inflation. Energy industry sources pointed out that although the US inflation data for June showed that the easing of price pressure was mainly due to falling energy costs, the continued rise in gasoline prices in July may rapidly change this situation, and the impact is far more than fuel itself — rising gasoline prices will drive up transportation costs, freight rates, and broader logistics expenses, which will eventually spread to the prices of goods and services throughout the economy.
Mark Zandy, chief economist at Moody's Analytics, said that if the situation in the Middle East escalates, the Strait of Hormuz will remain basically closed within a few weeks, and global oil stocks are expected to decrease further. Under these circumstances, the prices of oil, gasoline, and other energy sources will soar rapidly, and there will be a global shortage of physical supplies.